Two Trades To Watch: Gold, DAX - Thursday, Oct. 13

By Fiona Cincotta of Forex.com

Thursday, October 13, 2022 4:42 AM EDT

Gold falls ahead of US inflation data. DAX falls as inflation jumps.

Gold falls ahead of US inflation data

Gold is falling today as attention turns to the US CPI inflation report. Inflation is expected to ease to 8.1% YoY in September, down from 8.3% in August. However, core inflation is expected to rise again to 6.5% YoY, up from 6.3%.

Hotter core inflation again would suggest that inflation is stickier than initially thought. Hot core inflation supports the Fed hiking rates more aggressively and keeping interest rates higher for longer, which is bad news for non-yielding gold.

Gold needs to see a dovish pivot from the Fed before it will see any meaningful move higher. The minutes to the September FOMC highlighted that a dovish pivot is still nowhere in sight, with policymakers agreeing that the risk of doing too little outweighs the risk of hiking rates by too much.

Where next for Gold prices?

Gold rebounded lower from the 50 sma, taking out support at 1680 and the 20 sma at 1672. This, in addition to the bearish RSI is keeping buyers hopeful of further downside.

Sellers will look for a move below support at 1654, the September 19 low. A break below here brings the 1614 2022 low into focus.

Buyers will look for a move over 1680 the July low, to bring 1700 round numbers and 1713 the 50 sma into focus. It would take a move over 1730 the October high.

DAX falls as inflation jumps

The German index dropped 0.3% yesterday and is set to extend the selloff today for a sixth straight session.

German inflation data confirmed that CPI rose to 10% YoY in September, up from 7.9% in August. The data piles pressure on the ECB to raise interest rates aggressively when it meets later this month.

The data comes after the German government slashes 2023 growth forecasts and now sees a 0.4% contraction as soaring power costs hurt industrial output and consumer spending. Growth projections for this year were also cut to 1.4% down from 2.2%.

Looking ahead all eyes will be on US inflation data which will drive the market mood.

Where next for the DAX?

The DAX rebounded lower off the 20 sma and is heading towards 12000, the psychological level. The RSI is supportive of more losses whilst it remains out of oversold territory.

Sellers will look for a move below 12000 to open the door to 11810, the 2022 low, ahead of 11350 the October 2020 low.

Buyers will look for a move over 12400 the 20 sma and 12730 the October high to stage a recovery towards 12900 the 50 sma.

More By This Author:

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Two Trades To Watch: DAX, USD/CAD - Thursday, Sept. 29
Two Trades To Watch: DAX, USD/CAD - Tuesday, Sept. 20

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such ...

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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